Will France and Greece get an end to austerity?

 

           Over the next few weeks democracy in Euroland is on trial. Most pundits and commentators agree that French electors voted in Mr Hollande to end austerity. Most agree that the massive swing against Pasok and New Democracy in Greece was a swing against austerity policies in the Euro and EU. The problem is, the voters may end up with little changed austerity policies come what may.

            Part of  the reason is the voters’ own mistake. Many French and Greek voters who want an end to austerity think they can have that without withdrawing from the Euro. I fear that is very difficult if not impossible. Voters in Euroland seem reluctant to accept that the whole architecture of the single currency is founded on austerity all the time the huge imbalances between Germany and the rest persist. If the rich areas refuse to send much money to the poor areas – as they do – the poor areas have to deflate, cut wages and costs severely, until they can compete. This cruel economic logic is not popular, but voters are reluctant to conclude that the currency is at fault.

             Part of the reason is the way the Euro area is governned. It  has been governed in recent years by a Franco-German alliance. The European Central Bank was part of this agreement, with a German home and constitution, and a French Head. Now it has an Italian Head it has started to have more of a mind and a printing press of its own. That has kept the unstable system afloat, but it has not remedied the defects of the whole system.

                The Franco-German alliance put in place a Stability and Growth Pact. The Stability part came from Germany. It was a set of rules to make countries cut back if they have too large a deficit, or if their debt is excessive. The Growth part came from France, and amounted to some modest scale EU spending programmes. In recent years the Pact has delivered neither stability, nor growth to the poorer regions of the Eurozone.

                  Mr Hollande would  be right to demand a rethink. I suspect he will settle for a few extra public spending programmes from the EU as a “Growth package” and a pledge by Mrs Merkel to respect his position and to work with him in their joint interest for the stability of the currency. He will soon be brought into Euro line, by plenty of advice telling him that France being too argumentative, negative or spendthrift will destabilise the banking system and upset the currency system.

                 In Greece it looks likely it will take time to form a Coalition government out of the fragmented results. The new Coalition may contain some angry MPs who do wish to speak out against the austerity policy forced on them by the loans. They will be told by the bureaucrats that they have to accept the terms of the loans if they wish to carry on paying the large public sector bills. They will probably under protest go along with it, fearing to rupture a precarious and unsatisfactory agreement.

                  European voters in two Euro countries will discover that they have very little power left to change economic policy all the time their country is in the Euro. Taxes will stay high and public spending  will prove difficult to cut in a downturn. The governemnts will pretend to squeeze the deficit down in order to qualify for EU support in the case of Greece, and EU approval in the case of France. Meanwhile, economies will suffer. Expect the informal economies to flourish, as more people decide to take the illegal course of opting out of the world of accurate tax returns and audited performance. Expect more to leave countries that are floundering under the Euro austerity scheme. The governments themselves will carry on failing to hit Euro targets whilst talking tough and pretending to deliver.

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114 Comments

  1. lifelogic
    Posted May 7, 2012 at 6:17 am | Permalink

    “Democracy in Euroland” does this really exist in the EU in any meaningful sense. Otherwise all you say is quite correct.

    M. Hollande will, I assume, start to end austerity by first sending all the millionaires and their money and businesses to London with his 75% income tax (on top of the absurd wealth tax).

    The BBC are seeing it as a move to the left and rejection of the right – but France, like the UK, has been left wing, overtaxed and over regulated lunacy for many, many years. Still it will assist London greatly, especially if Cameron finally does some sensible things for once.

    • Bazman
      Posted May 7, 2012 at 6:56 am | Permalink

      So millionaire are not about to leave London they are about to arrive. You really just make it up. This idea that not taxing the rich, because somehow they create their money from thin air and distribute it to the rest of us via the trickle down effect is for the birds.

      • lifelogic
        Posted May 7, 2012 at 9:03 am | Permalink

        If you invent or produce some new technology (or system that saves time and money) you do indeed produce money from thin air. The money and clever people will go to the most conducive place to put their plans to work. Why on earth would they not?

        • uanime5
          Posted May 8, 2012 at 5:04 pm | Permalink

          No they don’t. They get money by taking the market share from a competitor, so the amount of money remains the same.

          • David Price
            Posted May 9, 2012 at 8:05 am | Permalink

            Wrong, right, wrong.

            If I sell a product or service against competitors in a different market, eg EU, US, Asia etc I acquire revenue from that market and add to the UK economy.

            This is a critical part of the UK economy since we have so many people who do not generate revenue (eg public sector and those on benefits) but happily spend more than our generated revenue on imported goods and services.

      • backofanenvelope
        Posted May 7, 2012 at 10:24 am | Permalink

        Surely there can be no doubt that a lot of really really rich foreigners have arrived, and are arriving, in London. When you look at the alternatives, who can blame them?

      • Susan
        Posted May 7, 2012 at 4:41 pm | Permalink

        Bazman,

        It is possible that if Francois Hollande does introduce the 75% tax for those earning over one million Euros, except for footballers if I understand him correctly, that some wealthy individuals will move to London.

        He would be mad to do it if he is serious about wanting growth over austerity, because high taxation impedes growth.

        • uanime5
          Posted May 8, 2012 at 5:03 pm | Permalink

          If the wealthy don’t want this tax then why were they calling for it to be introduced so they could make a greater contribution?

          • Bazman
            Posted May 9, 2012 at 5:09 pm | Permalink

            They are like children sharing sweets. Communists.

      • lifelogic
        Posted May 7, 2012 at 4:48 pm | Permalink

        Bazman -The UK is great for rich non-doms they just pay £30K if they arrange their affairs well – not so good for UK domicile high earners or wealthy who have to pay a huge amount. So they all leave and the nondoms and French arrive.

        • Bazman
          Posted May 8, 2012 at 8:00 pm | Permalink

          We need an acknowledgement of the problems of second holiday homes cause from you before we belive the flannel about rich non doms adding to the economy. Many just own property here. A bolt hole from the source of ill gotten gains in many cases.

      • uanime5
        Posted May 7, 2012 at 5:54 pm | Permalink

        Quite true. Next we’ll be told that because the top tax rate has been cut by 5% that all the French millionaires who came to London will produce 5 times the tax revenue they were producing in France because we have a lower tax rate.

        • stred
          Posted May 8, 2012 at 8:31 pm | Permalink

          I doubt whether the french entrepreneurs will come to the UK. We have double taxation agreements and they may be screwed by both ways. Better to go elsewhere.

      • lifelogic
        Posted May 8, 2012 at 5:54 pm | Permalink

        Bazman if some one gave you £1M PA to live outside the UK for all but 90 days what would you do?

        The rich people coming in are often nondoms and so do not pay taxes on income from outside the UK so are not deterred.

        • Bazman
          Posted May 9, 2012 at 5:08 pm | Permalink

          Whatever the rules. Like Germany if they are claiming they are living abroad and are not they should be prosecuted. Many have been and Germans are not very sympathetic.

    • lifelogic
      Posted May 7, 2012 at 7:05 am | Permalink

      “The Coalition risks being seen as a ‘bunch of accountants’ warns David Cameron” in the Telegraph today – if only.

      They are more like a load of spendthrift children let loose in a sweet shop with others money – soon to be playing “angry birds” on all their new Ipads.

      A few sensible bean counters would be a very welcome change. Then we might still have all the billions wasted on the IMF, the pigis and all the green tosh. We might have rules out carbon capture and HS2 (as it costs at least 10 times any value it would bring) and might have gone ahead with Heathrow, Gatwick, fracking and nuclear power stations.

      • Arunas
        Posted May 7, 2012 at 6:05 pm | Permalink

        Right on the money. Only MPs are probably as angry as we are, but they are whipped into the party line and told to shut up. Whitehall rules – and why shouldn’t it, having all this money under control.

    • Susan
      Posted May 7, 2012 at 10:18 am | Permalink

      Lifelogic,

      It is pretty lucky then that France is in the EU because Francois Hollande would bankrupt the Country with his policies if he were allowed to spend as he see fit. Just as Gordon Brown would eventually have done in the UK. The EU does have its uses.

      It is in fact the voters both in the UK and in the EU who are lurching left and right, simply because they are trying to find an easy fix to avoid austerity. Sooner or later the penny will drop and the public will realize their is no easy way out, then the trouble will really begin.

      • lifelogic
        Posted May 12, 2012 at 5:07 am | Permalink

        Well perhaps, but had France not been in the EU they might have elected more sensible leaders.

    • Susan
      Posted May 7, 2012 at 1:13 pm | Permalink

      lifelogic,

      Isn’t that a bit hypocritical of you to welcome French wealthy people to London from France. After all you do not believe in the EU and the open door immigration policy that you say is forced on the UK. Or is this just a rule that applies when the people concerned are not wealthy. I thought people like yourself believed in closing the door on those coming from the EU because the UK had too many people already.

      • lifelogic
        Posted May 7, 2012 at 8:54 pm | Permalink

        I do not believe in preventing immigration or migration it can be a good thing. But I do think the UK should be in control of whom they accept when and how many. They cannot afford, as now, to take an endless stream of people, who are clearly going to be a net liabilities on the state. Certainly in the short term anyway.

        • Susan
          Posted May 8, 2012 at 3:08 pm | Permalink

          lifelogic,

          So what you are actually saying to me is that a wealthy person who contributes nothing to the UK economy other than pushing London house prices up should be allowed in and others that may eventually contribute more should not.

          So this closed door policy should only apply to those who are not wealthy is that right?

          You do realise that the British have the same freedom to live and work in the EU as they do to come to the UK. Ever wondered why so many unskilled immigrants from the EU want to come to the UK and not to other EU countries. Could it be that it is the UK Government that is to blame for this and not the EU?

          • lifelogic
            Posted May 12, 2012 at 5:12 am | Permalink

            It is surely a question of whether the person can support themselves and their families and pay some fair taxes or will be a net drain on the state sector.

            Clearly we can only afford so many of the latter without the state having to raise taxes – which pushed the former out of the country and bankrupts the state eventually.

  2. Antisthenes
    Posted May 7, 2012 at 6:42 am | Permalink

    That sums it up with great clarity. It appears that you are of the same opinion as me that in the end a financial disaster cannot be avoided. I have said before that politicians will lose control and events will take over and that is now true. Both left and right have been emasculated because the left cannot introduce more tax and spend as Germany wont countenance it as it is not prepared to underwrite that policy . The right cannot keep up austerity and reform programs as the voters wont let them. The euro cannot be sustained and it cannot be scrapped as the costs are too high. If ever there was a situation where the builders had built a building without exits this is one of them and the only way out now is to knock the building down. The foundations of the building already weak from the excessive weight of social democracy will collapse even if the builders fail to do it.

  3. norman
    Posted May 7, 2012 at 6:42 am | Permalink

    Phew, would hate to be in that position: no noticeable difference regardless of who you vote for, private sector being crushed by bureaucracy and taxes, a massive public sector dictates what is politic even if it’s not in the best interests of the many, debasement of the currency via the printing presses, overtaxing the population, the political class being told by the bureaucrats what they can and can’t do, squeeze on wages, lower living standards, no growth agenda, widespread dissatisfaction with the political class.

    • LBS
      Posted May 7, 2012 at 9:38 am | Permalink

      Oh, wait a minute …
      Spot on.

    • Robert Christopher
      Posted May 7, 2012 at 10:06 am | Permalink

      Does the French language have a word or phrase for “déjà vu”?

    • Martyn
      Posted May 7, 2012 at 10:58 am | Permalink

      Indeed, as you say, we are so lucky not to be in the same position as that which might overtake France.

      Happily, our dear leader announces in the DT this morning that “he gets it” – yes, he really gets it!

      Which begs the question, where on earth has he been for the past 2 years?

    • Duyfken
      Posted May 7, 2012 at 1:13 pm | Permalink

      Nicely done, and needs no punchline.

    • davidb
      Posted May 7, 2012 at 5:12 pm | Permalink

      ROFL.

      Sarcasm, the lowest form of wit.

      • lifelogic
        Posted May 7, 2012 at 8:55 pm | Permalink

        but perhaps a good sign of intelligence?

  4. Mick Anderson
    Posted May 7, 2012 at 6:47 am | Permalink

    I suspect that there will be as big a change in France as there was in the UK when Mr Brown was voted out.

    None.

    • Magelec
      Posted May 7, 2012 at 10:03 am | Permalink

      What change?

    • A Different Simon
      Posted May 7, 2012 at 2:14 pm | Permalink

      I fear that you are right .

      It has taken 2 years to determine that the coalition have done nothing , changed nothing and do not propose to do anything .

      In the case of Francois Hollande we should be able to tell much more quickly whether he can unite France . I wish him and France success .

      I like his promise of recruiting 60,000 extra teachers . Presumably that would take his whole term in office unless he lowered standards .

      Politicians over here in the UK rarely use the state system so have no real interest in it succeeding and possibly even have an interest in it failing .

      I’d like to see the UK raise the bar for entrance onto teacher training courses and purge innadequate teachers who cannot improve before replacements become available .

      The children’s education must come first . Teachers who no longer meet the grade should be compensated generously for having to find an alternative career . It is not their fault that the bar was set too low to start with .

      • uanime5
        Posted May 8, 2012 at 3:57 pm | Permalink

        Given how many unemployed people there are in France with a university education it should be a relatively simple task to train 60,000 of them to be teachers.

        Sadly the Government is going in the opposite direction regarding the standards of teaching as you no longer need to be a qualified teacher to teach in an academy.

  5. ian wragg
    Posted May 7, 2012 at 6:49 am | Permalink

    Democracy and EU should not be used in the same sentence.

    • lifelogic
      Posted May 7, 2012 at 8:56 pm | Permalink

      Indeed they are opposites.

    • matthu
      Posted May 7, 2012 at 9:07 pm | Permalink

      I think you intended to say:

      “There are certain words which should not be used in the same sentence as ‘Democracy’. ‘EU’ is one of them.”

  6. colliemum
    Posted May 7, 2012 at 6:49 am | Permalink

    It is sloppy thinking to subsume the election results in France and Greece under the expression “people are against austerity”, as the BBC reporters are doing. It is sloppy thinking to subsume these two election results and those of our local elections under the slogan ‘people are turning to the left’.

    I suggest people will vote against ‘austerity’ as long as they see their leaders and especially the EU in all its forms swimming in money while not presenting any viable solutions except taxes, which they themselves can escape paying in various legal or nefarious ways.
    Therefore people fall for the socialist siren song of taxing ‘the rich’ – overlooking both that the left ‘rich’ are usually behaving just as all the other ‘rich’, and overlooking the way that there is no way the left can deliver as long as the huge EU bureaucracy is living the life of Reilly on all our taxes, be they Greek or French, German or even British.

    Even where leaving the EU and the € is not an option, isn’t it time for politicians and MSM to take a long hard look at the huge, one-size-fits-all salaries EU bureaucrats and commissars get? Isn’t it time to take a long hard look at the EU budgets which haven’t been audited for over a decade now?

    People vote ‘against austerity’ because they can see and have seen that all those, regardless of their political colour, are preaching water to us, who have to pay, while drinking wine – or should that be champagne …?

    • Mike Stallard
      Posted May 7, 2012 at 9:24 am | Permalink

      I think you are being a little naive here.
      We can look as hard as we like at the bureaucrats in Berlaymont, but they are not listening or caring because they do not have to.
      I warmly agree however that the socialist pipe dream appeals to a lot of very sloppy thinkers. We can, they say, end austerity by investing in the economy. This will mean according to all the economists, led by JM Keynes, prosperity for all. People whose livelihood depends on state hand outs fall for this every time. Especially if they can blame and tax other people – see Bazman above.

      • lifelogic
        Posted May 8, 2012 at 5:16 am | Permalink

        “the socialist pipe dream appeals to a lot of very sloppy thinkers” indeed it does it is a convenient lie that appeals to voters and some politicians alike. Pay people to dig holes then fill them in a gain and all will be well.

        And there are a lot of sloppy thinkers about – not just Cast Iron, Mr Morally Repugnant and all at the BBC. Look at how many buy lottery tickets, how many have irrational beliefs, how many vote for Labour and the Libdems and how many like “renewables” or think trains, bikes and buses are more efficient than a small full efficient car.

      • Bazman
        Posted May 8, 2012 at 7:56 pm | Permalink

        The sloppy thinking lies in the idea that creating desperation will somehow create motivation and that the trickle down effect of gifting the rich money Yes in many cases the money is little more than a gift in the form of less tax is somehow going to create more jobs for the average person. It is not. Bush transferred billions to the most wealthy and got nothing for it. Whilst a race to the bottom cutting someone elses benefits or income.is ‘a ladder up’. The idea is laughable. We need to help you lifelogic by reducing your income and in this way you will do some work and not have so much time on your hands.

    • norman
      Posted May 7, 2012 at 12:27 pm | Permalink

      Think it’s still banned from the Tory party conference.

      Another PR success story. No one would associate champagne with the Tories if not for this ban, now the two are linked whenever I hear about champagne and political parties.

  7. Geoff M
    Posted May 7, 2012 at 7:07 am | Permalink

    So the cradle of democracy wakes up this morning to find that it has a 7 party hung parliment-wow- how sad is that.

    Demitri had better jump into his fishing boat and start drilling like crazy into the Mediterranean seabed to extract the hydrocarbons just like the Cypriots, while Pavlos had better ride his donkey up the mountains and start extracting the gold and coal contained in them before the price drops.

    Such lovely people and a wonderful country and lets hope they have the resolve to export their way out of austerity while the euro crashes around them as they revert to their own currency.

    • Mike Stallard
      Posted May 7, 2012 at 9:26 am | Permalink

      Apparently some villagers have resorted to issuing paper credit notes already.

    • uanime5
      Posted May 7, 2012 at 5:57 pm | Permalink

      It’s rather worrying when people see a 7 party hung parliament as being inferior to one party having a majority and acting as a dictatorship.

  8. oap
    Posted May 7, 2012 at 7:08 am | Permalink

    This sounds a likely outcome to me.

    This am, Mr Cameron is reported to say that he does not want his government to sound like a bunch of accountants. Is this his version of an end to austerity? If so he is sadly mistaken. I want a government that can add up, do its sums properly, does not say it is dealing with the deficit and the debt when both are going up. Any pensioner looking at the near non-existent returns on their savings, any low income family trying to make ends meet, any business looking at the risks of new investment, any lender to the UK government will certainly be doing their sums – asking whether it all adds up. They will not be reassured by Mr Cameron`s remarks about accountants. It is a pity he didn`t do his sums into the effect of wind farms before he squandered, and continues to squander, billions of £ of our money on them.

    • Manof Kent
      Posted May 7, 2012 at 12:16 pm | Permalink

      Couldn’t agree more !
      It might help all understand more fully what the real situation is if deficit and
      debt figures are published regularly,say monthly/quarterly,so that it is at least more difficult for GO to say he is paying down debt when he isn’t.
      He seems to think he is reducing both so let’s have the numbers to prove it.

  9. alan jutson
    Posted May 7, 2012 at 7:14 am | Permalink

    Could be that Germany leaves the Euro !!!!!!

    Why keep on bailing out the feckless ?

    The IMF always gets its money back (says George) ?

    • lifelogic
      Posted May 7, 2012 at 9:09 am | Permalink

      IMF may give the money back but at poor rates and with a very real huge lost opportunity cost from the good things that could have been done with it had it not been misdirected.

    • Alan Wheatley
      Posted May 7, 2012 at 11:13 am | Permalink

      Are not investors always warned that past returns should not be taken as a guide to future performance?

      • alan jutson
        Posted May 8, 2012 at 8:35 am | Permalink

        Alan

        “Past returns should not be taken as a guide to future performance”

        No that statement is usually used for us plebs out here, not for governments, who should know that this is the case, as they have experts on tap in financial matters !!!!!!!!.

  10. GJ Wyatt
    Posted May 7, 2012 at 7:57 am | Permalink

    The Stability and Growth Pact was undermined by both Germany and France when they decided it did not apply to them, having broken the rule that the public deficit should be no more than 3% of GDP. Lack of discipline is infectious.

  11. Brian Tomkinson
    Posted May 7, 2012 at 8:01 am | Permalink

    JR: ” The governments themselves will carry on failing to hit Euro targets whilst talking tough and pretending to deliver.”
    Sounds rather like our own government . Plus ca change, plus c’est la meme chose!

  12. Damien
    Posted May 7, 2012 at 8:13 am | Permalink

    When I read the last paragraph I considered how that could equally apply to UK voters and sterling.

    Germany has passed legislation and implemented a huge firewall which could just as easily be interpreted as preparations for them to return to the DM. The Norwegian soverign wealth fund which is the largest in the world has sold all its Irish and Portuguese bonds last week.

    We have exposure to Ireland. RBS owns Ulster Bank which has announced losses of £310m in the first quater and provision for bad debt of £390m. That would mean losses are up 25% on last years £1bn loss at Ulster Bank. Ulster Bank losses are two thirds from the Republic. Stephen Hester visited Dublin and was quoted by the BBC as having obtained assurances regarding the new Personal Insolvency legislation. We have had assurances from ireland before but there is no guarantee that the fiscal transfer from Uk taxpayers via Ulster Bank won’t increase.

    • Nick
      Posted May 7, 2012 at 9:55 am | Permalink

      Germany and a few others could leave the Euro – high and dry.

  13. Richard Evans
    Posted May 7, 2012 at 8:19 am | Permalink

    Spelling error “Ovear”

  14. Richard Evans
    Posted May 7, 2012 at 8:34 am | Permalink

    Spelling error “governned”

    It’s obvious what the people are really voting for, an end to the Euro. Will the politicians listen, or will it take a more extreme govt to take the step the people want?

    • lifelogic
      Posted May 7, 2012 at 9:11 am | Permalink

      Of course they won’t listen – the BBC won’t even admit that is what it is.

    • Mike Stallard
      Posted May 7, 2012 at 9:28 am | Permalink

      And who, pray, do you think are “the people”?

  15. zorro
    Posted May 7, 2012 at 8:49 am | Permalink

    Mr Hollande is one of the ruling elite bureaucrat class, so I wouldn’t expect too much from him. France may become more unstable. Expect more strikes and blockades and they might start sabre rattling with regards to the border situation at Calais…..perceiving the current UK government’s weak position. John’s analysis seems reasonable highlighting the likely libertarian drift to minimalising one’s tax return where possible or a more barter like/unregistered economy. In fact, I suspect it has been happening for quite a while in those countries.

    zorro

  16. Steve Cox
    Posted May 7, 2012 at 8:58 am | Permalink

    The choice that is being presented by many commentators is that troubled countries like Greece can either leave the Euro and suffer a large devaluation, or else they can keep the Euro and suffer years of austerity and debt deflation instead. Little wonder that the turkeys aren’t voting for Christmas. The truth is, though, that these options as presented are too simplistic. Even if Greece left the Euro, and the New Drachma suffered a 50% devaluation against the Euro, the government would still have to get its deficit under control and start to become much more serious about tax collection. Devaluation, after all, is primarily a means of improving export competitiveness and fostering future growth rather than an efficient method of cutting budget deficits. Ditto Spain, Portugal and Italy. Britain, of course, has accepted the devaluation of Sterling (for what little good it appears to have done), has implemented the tax increases needed to help balance the budget (with much moaning, admittedly), and now faces the hardest part of the task which is cutting spending. I wonder if voters on the troubled fringes of the Eurozone look at the UK’s position and find little solace or comfort in what they see? After 3 years of a debauched currency and endless soundbites about austerity (even if the spending cuts have hardly begun), the country is hardly an economic tiger. Perhaps Eurozone voters are hoping that there’s another way out of the mess, a sort of ‘Brownsian’ (or maybe that should be ‘Hollandeian’?) solution involving ecofantasy, in which you can have your Eurocake and eat it too, without the bitter topping of austerity.

  17. stred
    Posted May 7, 2012 at 9:28 am | Permalink

    Listening to the final debate between Sarko and Hollande, I was impressed with their ability to recall and quote figures in detail. If Cameron thinks his team are in danger of being thought of as accountants, he should read to a transcript of the French debate. Sarko even knew details of teaching salaries. He made the PM’s team look like schoolboys playing politics.

    Of course the French think Sarko is something of a yob, despite his background and he seemed to behave like one sometimes. I was surprised that my once French partner was relishing his downfall and thrilled at the success of the more presidential M. Hollande. She thought his intentions to sort out the bankers was the most attractive policy. I pointed out that his 75% income tax would yield less tax, that his proposals to do away with nuclear power would be disastrous and that his retention of their generous early retirement benefits is impossible.

    But it seems the French, as the British, can be taken in and will vote on personality rather than substance. One visit to see Mrs Merkel will be enough to restore reality. She can’t allow closure of french nukes as she needs them in order to close hers and the normal Euro constraints will set the budget.

  18. sym
    Posted May 7, 2012 at 9:37 am | Permalink

    John,

    You seem to think that withdrawing from the Euro and – if I understand correctly – devaluing the currency doesn’t produce austerity.

    That isn’t the case. Big inflation brings about severe austerity for everyone bar the exporters. It redistributes wealth massively from savers (in the wider sense) to borrowers. It grows economic inequality. It increases instability and uncertainty.

    More importantly, while it may ease the government’s core problem (unbalanced budgets) for a while, it doesn’t fix it.

    There’s no other way to fix an unbalanced budget except for balancing it. To balance the budget you need to decrease spending and increase tax intake.

    Spending cannot be cut in democratic countries; the public is used to voting itself salaries, pensions, welfare and public services and won’t stand for cuts.

    Increasing tax intake significantly is in my opinion impossible in much of the EU. Just about everything that can be taxed is taxed usually way beyond the point of diminishing returns.

    This leaves growth, which you can’t have with such massive public sectors and insane welfare spending.

    There’s no fix. The public – through democratic vote – enforces the idea that nobody can be poor irrespective of how many disastrous life choices one makes. That one can have as many children as one wants without worrying about paying for them. That it’s all right for some to work a lifetime to pay a mortgage, and for others to simply get a free or heavily subsidise home. That a vote majority has enough legitimacy to allow confiscation of legally-obtained income and wealth.

    Until the public sheds these ideas as being economically absurd and morally bankrupt, we’ll have precisely absurd and bankrupt democracies.

    • sym
      Posted May 7, 2012 at 9:46 am | Permalink

      PS: this morning on TV I hear repeatedly the word “growth” being used as a synonym to “increased public borrowing and spending”.

      It’s absurd. Public borrowing and spending doesn’t bring growth any more than me taking a loan from the bank and going on holidays, while pretending that my standard of living has reliably improved long-term, is anything but a pretence.

      • lifelogic
        Posted May 7, 2012 at 9:00 pm | Permalink

        Exactly it is the opposite of real growth.

  19. Nick
    Posted May 7, 2012 at 9:55 am | Permalink

    Part of the reason is the voters’ own mistake.

    ===========

    And your mistake is in thinking that the voters get to have a say on issues.

    They don’t. It’s just who is the next person to claim all those expenses.

  20. Martin
    Posted May 7, 2012 at 9:55 am | Permalink

    Perhaps we should end the long queues at UKBA before we start telling other countries how to run their affairs.

  21. NickW
    Posted May 7, 2012 at 10:24 am | Permalink

    Once the State Sector reaches 50% and/or borrows too much, it has been pointed out on “Zero Hedge” (Financial website, highly recommended), that a Country becomes ungovernable.

    Once the beneficiaries of a socialist welfare state are equal in number to those who are forced to fund them by taxation, then it becomes impossible to form a democratically elected majority Government to decrease State spending.

    It becomes impossible for a Government to break its dependence on borrowing, unsustainably high taxation, or money printing. That is where the UK is now; the BBC is biased because its extravagant salaries and lifestyle are dependent on State funding, and that won’t change while State funding continues.

    It would follow that a Government which is facing up to its long term responsibilities for the economic health of the Country, should endeavour to reduce spending in ways which do not provoke mass protest; there is no other choice.

    As an example, there will be no mass protests if Foreign Aid is stopped completely, and all our contributions to Europe are stopped too.

    Presentation of spending cuts has to emphasize always that spending cuts or tax rises will disadvantage a minority whilst benefiting a majority. The pasty tax is a clear fail.
    Increasing alcohol duty on off licence sales whilst preserving duty at present levels on sales in licensed premises would be viewed far more favourably than blanket increases in Duty.

    There has to be far more emphasis too on the way in which present policies are saddling our children with a level of State and personal debt which will catastrophically blight the whole of their lives.

    Mothers in particular will have a lot of sympathy with Government actions which are presented as being necessary to protect the future of their children.

    Labour policies will inevitably destroy our children’s future. Official Labour policy is effectively to break our children’s piggy banks and force them to pay for our extravagant and selfish lifestyle.

    • NickW
      Posted May 7, 2012 at 12:04 pm | Permalink

      Given what we know about Gordon Brown, it seems more than likely that the Family Tax Credit system was deliberately designed to lift the proportion of the population dependent on State benefits above the 50% mark, knowing that that would make the Socialist edifice impossible to change.

      Selfish political scheming by Labour has ensured guaranteed financial Armageddon for our children.

      • stred
        Posted May 8, 2012 at 7:27 am | Permalink

        Tax credits also encourage the less well of to produce more children. Most of these will become socialist voters who appreciate their benefits.

        • stred
          Posted May 8, 2012 at 8:41 pm | Permalink

          Sorry ADD f t o.

      • uanime5
        Posted May 8, 2012 at 3:48 pm | Permalink

        Well the only alternative to tax credits was to raise minimum wage to a living wage but for some reason companies didn’t like that idea.

  22. Robert Christopher
    Posted May 7, 2012 at 10:29 am | Permalink

    JR: “Part of the reason is the way the Euro area is governed.”

    It’s tribal, and aggressive at that! Even feudal is better than that, as it implies that there is the rule of law, property rights and justice of a sort, even if it is often rough justice, without appeal. (The powerful also have a vested interest in ensuring the stability of the family unit.)

    On the other hand, aggressive tribalism, due to incompatible legal and financial systems and culture leads to disagreements over legal tender, lack of trade and the inability to defend our borders, with the uncertainty driving out hope and leading to escalating violence between the tribes.

    • Robert Christopher
      Posted May 7, 2012 at 10:58 am | Permalink

      Is that Cameron’s strength: he is NOT tribal. That is very ‘British’, very fair minded.

      But isn’t that also Cameron’s weakness? He cannot see when tribal warfare is operating, or he doesn’t know what to do when it threatens. Even if he does know, he certainly has no idea how convey that to the public.

      It’s what leadership is all about!

  23. Alan Wheatley
    Posted May 7, 2012 at 10:56 am | Permalink

    Voters may have made a mistake, but you can hardly blame them.

    The vast majority will have little or no understanding of national and international finance. Even familiar terms such as “debt” and “deficit” that take on a specific, technical meaning are likely misunderstood or not understood at all. Those who find it a challenge to balance their own budgets, other than in terms of spending the weekly pay packet, will be lost understanding investment and compound interest.

    So come an election votes will be cast on the basis of what seems to be the best on offer. Or more likely WHO seems to be the best on offer.

  24. Alan Wheatley
    Posted May 7, 2012 at 11:06 am | Permalink

    Is it correct to call the Euro Scheme an austerity scheme?

    Surely austerity is not the objective but the consequence?

    If the objective is a balanced budget and the means are not working then they are to be rightly condemned for both failing to balance the books and for causing austerity.

    If growth is a means of balancing the books then that is obviously to be preferred to austerity, but claiming to be in favour of growth is a long way short of having a credible plan to achieve it.

  25. Posted May 7, 2012 at 11:12 am | Permalink

    Being a cynic, I believe that nothing will change
    Hollande and his government will start to enjoy the prestige and perks of government and will do little to disturb the status quo. He’s fallen at the first hurdle by accepting Merkel’s invitation (ie summons) to visit her – he should have invited her to Paris.
    In Greece, where the population seems to want to stay in the Euro, but doesn’t want to abide by its rules, there will be more fudges from whoever is in power. The EU elite, who would loose face if Greece leaves the Euro will hold more meetings and issue more statements, usually blaming the world markets and ratings agencies for their problems and for the fall in the value of the Euro.
    Nothing will change, until the German people say “Enough is Enough” and Germany withdraws from the Euro, which I believe would probably be he best solution for all.

    Meanwhile Cameron (a man who appears to have no political beliefs) will try not to look like an accountant! I never did see him as one, I thought he was more like Nero, fiddling whilst Rome burns! In practice, we need some good accountants to work out whether being in the EU is value for money or not, but that will never happen as Cameron and all the mandarins involved are, like all the other EU leaders, addicted to the prestige and perks.

  26. A.Sedgwick
    Posted May 7, 2012 at 11:22 am | Permalink

    “The Coalition risks being seen as a ‘bunch of accountants’ warns David Cameron” – DT.

    It seems every time this man opens his mouth he shows a complete lack of grasp of our economic problems. The Coalition lacks a business like approach for which accountants are necessary. Not balancing the books, not cutting out unnecessary costs, hiding behind unrealistic forecasts and ignoring unpalatable risks are prime examples of an organisation not controlled by accountants.

  27. A.Sedgwick
    Posted May 7, 2012 at 11:49 am | Permalink
    • uanime5
      Posted May 8, 2012 at 3:44 pm | Permalink

      Given that a medium nuclear power plant takes 10 years to build I wouldn’t recommend demolishing wind farms immediately.

      Given how overloaded the courts and prisons are more prosecutions and trying to increase the ‘hit rate’ will just cost the tax payer more money and achieve little.

      Cutting welfare to give people tax cuts is likely to cost the Government votes as more people will be worse off due to benefit cuts than gain from tax cuts.

  28. Bazman
    Posted May 7, 2012 at 11:50 am | Permalink

    I am always amazed as to why why the EU has done so little to help the Belarus population living under a dictatorship right in the geographical centre of Europe. I say dictatorship because that is what it is. You can see it in the eyes of the crowd. The poverty there is so bad that many have abandoned the currency and have adopted a barter system as well as recycling old clothes. A lot of rich people there though. One building I observed was owned by local official, like something out of a fairytale. He had somehow crossed the government and was now in prison, the house confiscated. About two thirds of the population were wiped out during WW2. The art house film Come and See (1985) gives an accurate portrait of this.

  29. Derek Emery
    Posted May 7, 2012 at 12:32 pm | Permalink

    Unfortunately the unelected that control the EU have no understanding of economics, markets, finance, and risks. Their answer to the eurozone they created that could not possibly work in the real world was to extend it without any changes.
    The EU needs GDP growth yet has made the banks increase their capital requirements at the height of recession. This 100% guarantees banks will lend less slowing down economic growth which is the only way for the EU to get out of debt.

    In the UK this will mean GDP growth will be anaemic at best and the coalition are likely to find consequential lack of growth to their disadvantage.
    Hollande is saying that he will “dominate” financial markets and that finance is his biggest enemy.
    How can the EU hope to turn itself around with such people in charge?
    Europe has been uncompetitive for years and losing market share in the world just as China, India and others trend upwards. There is nobody at the top in the EU who is capable or turning the situation around and most of the elite do not seem to comprehend the problem they are in that they made far far worse by the creation of the Eurozone.

    • uanime5
      Posted May 8, 2012 at 3:31 pm | Permalink

      Who are the unelected that control the EU? It can’t be the heads of the European countries that make up the EU because they’re all democratically elected.

      • Lindsay McDougall
        Posted May 9, 2012 at 8:08 am | Permalink

        Never heard of the European Commission? They are the people that issue all the directives.

  30. Bill
    Posted May 7, 2012 at 12:47 pm | Permalink

    Any bets as to how long before George Im in charge of the money Osborne startsgiving 10 Billion plus to prop up the EURO?

  31. rose
    Posted May 7, 2012 at 12:48 pm | Permalink

    Does anyone ever point out ot the Greeks how well the Turks are doing? Presumably the French can see for themselves how well the Swiss and Norwegians are doing.

    I notice an alarming enthusiasm taking hold in the BBC, for joining the stampede against austerity while staying comfortably in the EU. They never give any sign of worrying about who is to pay for this glorious left wing future in which “growth” is conjured up by borrowing and printing yet more money.

  32. Manof Kent
    Posted May 7, 2012 at 1:04 pm | Permalink

    I found it rather disappointing that there was no ‘Bring Back the Drachma’ party in Greece.
    I was and still am keen to have a holiday in Greece when I can pay in drachmae and support an independent and proud people,but fear this could be sometime yet as the mood seems to be a blind one of ‘I love Big Brother Euro’
    John ,is this the result of years of easy euro money,an unwillingness to confront an uncertain future,or lack of confidence or what ?

  33. waramess
    Posted May 7, 2012 at 1:23 pm | Permalink

    “…”the whole architecture of the single currency is founded on austerity all the time the huge imbalances between Germany and the rest persist.

    This of course hits the nail nicely on the head and the sooner the other nations, including the French, accept this the easier it will be for them to seek a way out of the Euro.

    A silly idea in the first place is now coming to its inevitable conclusion and the longer the Euro remains in place the greater the chance of civil insurrection in Europe will be.

    The founders of the EU thought they could prevent future strife but the Euro will foment it and who knows whether the strife will be contained wthin borders

  34. rd
    Posted May 7, 2012 at 1:23 pm | Permalink

    M. Hollande is having a laugh if he thinks the markets are foot the bill for 60,000 new teachers etc. He says he’s going to beat the markets… good luck with that one.

    • uanime5
      Posted May 8, 2012 at 3:29 pm | Permalink

      Given the levels of French unemployment I’m sure he’ll be able to find 60,000 people willing to retrain to become teachers.

  35. David Langley
    Posted May 7, 2012 at 1:46 pm | Permalink

    The Greeks think they can take the money and never pay it back. The French love the EU subsidies and the CAP thats why they let us in the EU project. We stopped buying from our commonwealth and bought their overpriced food via the subsidised EU transfer system. No matter what politicians say and do in every country the answer is always the same . Work Sets You Free!!!!

    • uanime5
      Posted May 8, 2012 at 3:28 pm | Permalink

      Work only sets you free if you have a high paying job. Anything less and you’re a slave to the bank until all your loans are repaid.

  36. Denis Cooper
    Posted May 7, 2012 at 3:01 pm | Permalink

    Now, this time of crisis, is Cameron’s moment to establish himself as a leading European statesman, by making a speech in which he says …

    But he won’t, mostly he’ll just continue to go along with what Merkel wants.

  37. Posted May 7, 2012 at 3:49 pm | Permalink

    I suppose Club Med voters don’t want to swop their euro for old-style funny-money where everyone’s a millionaire but it buys you nothing. Also, they think the problems are caused by governments’ not intervening enough. They may further think that all we have to do is share-out the rich people’s money and we’ll all have enough. Oh, and they probably also think they’ve paid more than enough tax and it’s time they got something back (the last view being reasonable but unrealistic since the money’s all gone on state-workers’ pay and pensions). Let’s hope the disasters of Mr Hollande’s policies serve as a warning to the British electorate of what Mr Balls would do. I wish Mr Osborne would challenge the Liberals to break the coalition and really cut the public sector.

  38. John Cooper
    Posted May 7, 2012 at 3:52 pm | Permalink

    The economic performance of the member countries is irrelevant. The purpose of the EU is to provide agreeable ‘jobs’, nice pensions and generous expense accounts to members of the ruling elite. In this regard, it is doing very well.

  39. Bert Young
    Posted May 7, 2012 at 5:10 pm | Permalink

    Germany will not leave the euro because with a revalued D-Mark it would be un-competitive . France will modify its threat to re-negotiate the Fiscal Union Pact because its Banks are too exposed and it needs German support to protect this flank . Frau Merkel faces forthcoming elections and will soften her “austerity”package ; the German electorate will not vote away its wealth to weaker countries , so , Greece will flounder out of the Euro . This overall state is much as Dr. JR predicted several months ago . The UK watches from the sidelines with its hands tied . Oh well !

    • stred
      Posted May 8, 2012 at 8:48 pm | Permalink

      The £ has appreciated against the E by 20% in the last 6 months. Christ knows why but we might go on holiday there during the Olympics.

  40. merlin
    Posted May 7, 2012 at 5:28 pm | Permalink

    There are basically 2 unstated opinions on this website that are repeated ad finitum they are as follows:-

    1) the euro to disintegrate

    2) the EU to fail

    There are many forms of the above but this is what the majority of people on this website would like to see.
    My only comment at this early stage after the recent elections is be careful what you wish for, I can sense the feeling that because we have had socialists elected that this is the possibility of the end of the EUSSR. I think the exact opposite and suggest that as a result of the recent elections we will get more EU not less.

  41. merlin
    Posted May 7, 2012 at 5:30 pm | Permalink

    I think its called the law of uninteneded consequences

  42. davidb
    Posted May 7, 2012 at 5:33 pm | Permalink

    I think the crucial phrase in the essay is “destabilise the banking system”. Germany exports goods. It is not in German manufacturers interests to have negative growth in its markets, but its banks are owed lots of money ( Ireland knows that). The problems in Spain include big hidden bank debts. The French banks are owed lots by Italy. Once more the populations are being made to pay for a banking system which is bust. All that ECB money they created and lent out for minimal interest was lent to banks, not to car buyers. All the policy being pursued by everyone seems to do is paper over the duff bank problems.

    Some things are made in the EU still. A large tranche of the economy in all the countries happens anyway. Supermarkets stock shelves, farmers grow food, trucks transport stuff, TV stations broadcast, Tax collectors collect taxes. It is the banks that are broken.

    I have no idea now how to fix this. We are where we are. But can we stop pretending that the austerity is any more than a ruse to get the banks out of the hole they dug themselves. Savers are being paid pennies while inflation rises. We all pay the same prices – I have asked returning travellers – for Petrol everywhere pretty much in the EU – is it really us and not Brussels setting the tax rates? Theres a conspiracy going on to beggar the populations while letting the banks off the hook.

    There is a long history of civil unrest in most of Europe. The mob will not allow their views to be ignored. I can only see this ending in tears now. Vote for whoever you like, the policy remains unchanged. How democratic.

  43. Barbara Stevens
    Posted May 7, 2012 at 5:40 pm | Permalink

    It appears, John, that the eurozone is nearing a crisis, but they won’t accept it. We can see it from over here but they don’t seem to want to know. How will it pan out? With Greece now almost in collapse, and France demanding a new fistical pact, which the Germans have said NO, where will we go from her?. There are new rules coming from he EU, on justice rules which will make all justice laws come from there. They even have plans for all migrants to have pensions, which the taxpayers will have to provide, without a penny being paid by them.
    How Mr Cameron can ignore all this, and say nothing, beggars belief. We wouldn’t know half of what’s going on if it were not for the papers. Yet, Cameron still refuses our right to have a referendum on this encroaching EU. We have immigration increasing, and they all have to have somewhere to live, their children educated, and money to live on, all via the taxpayers. How long can this go on? I’ve read you alternative Queen’s Speech, impressive; but will Camero even read it? I doubt it. Its up to the Conservative Party themselves to curb Mr C, if he still refuses to do what they want, and the people of this country, then you have a duty to remove him. This would be for the safety and soveriegnty of this country. It is up to you all to know when enough is enough.

  44. uanime5
    Posted May 7, 2012 at 5:48 pm | Permalink

    Does this mean that the UK will no longer need austerity because weren’t not in the Euro? If not being in the Euro means still having to have austerity then your whole argument about the link between the Euro and austerity is effectively destroyed. It also means that leaving the Euro isn’t a magical solution for all the problem in the Eurozone.

    • Lindsay McDougall
      Posted May 9, 2012 at 6:33 pm | Permalink

      Not being in the Euro doesn’t mean that we don’t have to get rid of the red ink. In 2008, government was in debt, individuals were in debt, the trade balance was heavily red but at least business was in the black – or so we thought. Then the banks owned up to being naughty boys and in a spot of bother.

      Within an 18 month period, we realised that we were 10% per capita worse off than we had thought we were.

      The state cannot carry on spending money it hasn’t got so something had to be done. Public expenditure had to come down and/or taxes had to rise. There was – and is – no alternative. If the process turns out to be very painful, that’s just too bad.

      Just in case you are going to shower me with a load of Neo-Keynsian crap, let me give you some key numbers. UK GDP is about £1.5 trillion. Our historic growth rate since 1979 is about 2% (yes, that includes the recessions, as it should). Money supply should cover the increase in goods and services, so a non-inflationary fiscal deficit is about £30 billion. Compare that to the current fiscal deficit of £126 billion. We are still miles away from curing our problems – even if we do get back to 2% growth pa. The Bank of England can get up to all sorts of tricks to muddy the waters with monetary policy but don’t forget that £30 billion number.

  45. Arunas
    Posted May 7, 2012 at 6:08 pm | Permalink

    “…voters in two Euro countries will discover that they have very little power left to change…” – and that is the greatest tragedy of all. Voters in England feel they have very little power to change anything, so 68% did not bother to tick any box. Greeks also feel the same: given such a dramatic importance of the election, 32% decided their vote doesn’t make any difference. The are not wrong. But politicians, beware. When ballot box does not matter any more, (there are dangers of other ways of trying to get change-ed).

  46. Bazman
    Posted May 7, 2012 at 6:38 pm | Permalink

    Who are the ‘Feckless’? @ Governments and individuals need to tell this. Maybe Mr Redwood as a Tory Politician could explain. I do like to hear the opinions of difficult questions. Ram it.

    • zorro
      Posted May 7, 2012 at 9:24 pm | Permalink

      The feckless = those lacking purpose or vitality; feeble or ineffective….or….the careless and irresponsible…people who can work but prefer not to do so and live off benefits whilst doing ‘foreigners’ and not paying any tax. Those who decide to have children but can’t be bothered providing for them and become a cost on the state/taxpayer….those who come to this country and do not work, formulate bogus relationships and then become a drain on the state….Do you want any more examples?

      In any case, I am sick of paying taxes to support this lot. Ram it! (as you like to say)…..This is the bit where you go on to say that if we don’t pay benefits to them then they will all become career criminals., (etc -ed)…You can ram that too!

      zorro

      • Bazman
        Posted May 8, 2012 at 5:39 pm | Permalink

        Maybe we could vet lottery winners and if any are found to be claiming benefits, then as the ticket was paid for by the taxpayer then the taxpayer should get the prize. As silly as your comment. Ram it.

  47. sjb
    Posted May 7, 2012 at 8:05 pm | Permalink

    Incidentally, the turnout for the French and Greek elections was 81% and 65% respectively.

  48. Robert Christopher
    Posted May 7, 2012 at 10:24 pm | Permalink

    JR: Will France and Greece get an end to austerity?
    DC: there is no going back on austerity

    What austerity?
    At least a bunch of accountants should know two years have been wasted.

    Just as there was the Treasury, BoE and FSA, but no one was in charge, we now have Cameron and Clegg?

  49. peter
    Posted May 8, 2012 at 6:28 am | Permalink

    In reality the only option EZ has is to merge their economies into one true tax and spend fiscal system if they are to retain the Euro – the current system is unworkable, or leave it altogether.

    They need to accept this ASAP and put it to their peoples in referenda and give them the choice of option 1 or 2. 1 has huge democratic implications and 2 puts them back in control their destinies.

    Based on these factors I don’t think it matters who is in charge of France/Greece etc – if you are left wing or right wing you are still in the same straightjacket. If you are a socialist who wants to spend, spend, spend, tax, tax, the money has to come from somewhere – unfortunately we all know that the international money markets have a big say in this so whoever is in will be boxed in and most EZ countries are probably at tax saturation levels.

    I would not want to be in any of their positions – this whole thing is a self inflicted DISASTER!

  50. David Langley
    Posted May 8, 2012 at 7:49 am | Permalink

    A late comment after the news, it appears John that desperation is setting in with Germany cracking the whip and Greece going under in a shambles.
    Your very well put together plan for Greece to have an alternative future has been ignored.
    France will get what it deserves from Germany (Again).
    Why does history continually repeat itself, when I was born Germany was attacking democracy with all its might. Twice we have stopped them from taking us apart at massive cost. They now are doing it through our soft and venal underbelly and the stupidity again of some politicians and most of the electorate.
    I am not saying the Germans are even doing it as a plan or tactic deliberately, it is just in their nature!!
    As it is in the Nature of Greece and France to do nothing until its too late.

  51. Lindsay McDougall
    Posted May 8, 2012 at 7:52 am | Permalink

    What France and Greece (and Spain and Italy etc.) want is more TIME to reduce their fiscal deficits, less austerity not no austerity. Let us see if there are ways in which this could be achieved inside the Euro Zone.

    The ECB could, by one means or another, print the money and turn the Euro into a soft currency, depreciating against sterling and the dollar at whatever rate is necessary. Germany experienced hyperinflation twice within 15 years and won’t want to go down that road.

    Alternatively, there could be direct fiscal transfers from the financially strong Member States such as Germany to financially weak ones. Making the transfers loans at very low interest rates rather than outright grants would provide a fig leaf to the process. Unfortunately, Germany cannot afford to increase its fiscal deficit because its government debt to GDP ratio is already high. Therefore, any fiscal transfers from Germany must form part of its annual public expenditure, so German citizens will be immediately aware of their loss.

    So both possible methods would be directly against Germany’s national interest. However, anti-austerity sentiment now has the upper hand in the Eurozone. It is beginning to look as if the resolution of the Eurozone’s problems will begin with Germany leaving the Eurozone and reinstating the Deutschmark. Short of the Euro ending I can see no other way out.

    By the way, inflation is a hidden tax. It adds to hardship as much as formal austerity does.

  52. Posted May 8, 2012 at 9:05 pm | Permalink

    With the current crop of those in their forties so utterly weak & worthless all Western nation-states will drift towards crisis. Alarmism is deplorable when the times do not merit alarm. Today those expected to lead are paralyzed by their relativism. Really we are just so lucky not to be facing a Hitler or a Stalin. Undoubtly we would be unable to meet the challenge. As it is the namby-pamby & fake politicians are doing a pretty good job from within. Sarkozy made a lot of tough speeches & after “winning” the election dropped the whole program. He earned contempt & richly deserved to lose. If France is ungovernable (probably true) Sarkozy only made it more so. He is an utter disgrace. The Greeks have always been useless. Perhaps the Colonels return & restore the Monarch? Who cares? That is a sideshow & no amount of posturing will sufficiently paper over crisis.

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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